How Much Money Should You Save Each Month?

hands from family members holding a jar of money that they saved this month

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When it comes down to it, there's no right or wrong amount that you should save each month. With that said, your financial goals will help determine what percentage of take-home money you should aim to save. The more you save, the faster you'll reach your goals, and the bigger goals you can set and reach with greater ease.

In this article, we'll discuss factors to consider when determining how much money to save each month, ways to save money when you don't have a lot to spare, and important things to save for.

Let's jump right in.

Determine What You'll Need In The Future

Ask yourself questions like:

  • How much money will I need to retire?
  • When do I want to retire?
  • What are big plans I have for the future that I'll need money for?

Come up with and write down financial goals for yourself using monetary amounts and timeframes to get to those goals. For example, you might decide that you need $40,000 for a down payment on a house in the next four years, and with that in mind, you decide that you will save $10,000 per year for those four years to reach your goal.

As another example, you might determine that you want a retirement income of $60,000 per year, and you use the 4% rule to determine that $60,000 is 4% of $1,500,000, so you must save and invest money each year until you reach a lump sum of $1,500,000 to live off of in retirement.

Of course, these are simply examples, and you'll want to make financial goals based on various factors in your own life.

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Figure Out How Much Time You Need To Reach Your Goals

Perhaps one of the most important reasons to save as much of your take-home pay as possible is so that you can retire comfortably and at a time in which you want to. For example, if you plan to retire in 20 years, you'll need to save a lot more money each year than you would if you plan to retire in 30 years.

One of the easiest ways to determine how much money you need to save or invest each month is to use a financial calculator. Here's a link to Bankrate's retirement calculator. This calculator allows you to enter your current age, the age when you plan to retire, your income, your savings rate, and other factors. From there, the calculator will help you determine if you'll be able to retire as planned and, if not, you can change the values around – such as the amount you plan to save per month or your target retirement age – to see other ways to reach your goal. 

Where Should You Put Your Savings?

When saving for your future goals, you'll want to figure out where to put your money. Will you put your money in a high-yield online savings account for safety at the expense of minimal growth? Will you put your money in the stock market based on your risk tolerance in the hope of accumulating wealth? Perhaps you'll do a little bit of both, or invest in other avenues such as real estate or peer-to-peer lending.

For example, if you save $500 per month into an online savings account with a 1% interest rate and save for 30 years, you would have $209,814.11 at the end of those 30 years.

Using the same $500 per month for 30 years, if you were to invest that money into the stock market, and picked up an index fund that averaged 8% return on investment each year, a realistic average assumption, then you would have $745,179.92.

The difference is over half a million dollars, which is a pretty good argument for learning the basics of investing and investing your money versus simply saving your money in the bank.

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How can I save money when I don't have a lot to spare?

Saving money may seem difficult if money is tight or you're living paycheck to paycheck. There are several steps that you can take that will help you save money monthly. Given how important it is to save money, it makes sense to do everything you can to maximize your savings rate. 

Pay Yourself First

Paying yourself first means saving money from each paycheck before you spend any money. For example, if you tell yourself that you'll pay yourself 10% of each paycheck, and your paycheck is $1,000, then you would take $100 from your paycheck and transfer it to a safe place, such as a savings account or an account where you invest money.

The idea behind paying yourself first is that you enable yourself to save money without thinking about it, which builds up your nest egg. You can do this automatically by automating the transfer from your checking account to a savings account. 

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Get on a Budget

One reason that some struggle to save money is that they don't know how much money they're spending in the first place. The most straightforward remedy to this is to create a budget and stick to it. First, use a budget to track where your money is coming from, in the case that you have more than one source of income, and then track all of your individual expenses. 

When you track your expenses, you gain the ability to see where you're spending more money than you might like, such as spending too much on eating out or online shopping. This honest assessment of your spending habits will allow you to cut back in some areas, which will help you add to the amount of money you save each month.

Use Clean Cut Finance's free home budget spreadsheet to get started.

Start Small and Increase Savings Regularly

Start small when you're adjusting your savings habits. This may mean saving just 1-2% of your paycheck, or even $50 per month. If you're paying the minimum payment on your credit card each month and you apply an extra $50 per month, you could potentially save hundreds of dollars in interest payments over the course of paying off the total balance.

Many experts say that saving 20% of your take-home income is best, and if it's challenging to do this, then start with as much as you can and work your way up. 

When you consistently save money, you build strong habits that can carry you throughout life. You'll find that you'll be more likely to stick to your savings plan when you don't have to think about it – it's a habit.

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Use Round-up Apps to Help You Save

A round-up app, such as Acorns, encourages you to save money by rounding up your spending to the nearest dollar and investing the difference. For example, if you spend $3.30 on coffee, Acorns would round up to $4 and invest $0.70. 

Over time, your round-ups, along with additional money transferred to your account, grow into a nest egg that you can use at a future date.

Apps like Acorns have a flat monthly fee, usually between $1 and $5 per month, so if you do invest in apps like these, ensure that you're investing enough money such that the monthly fees aren't taking too high a percent of your gains. It's common to pay up to 1% of your account value as annual advisory fees, so if you're paying much more than that, you might want to consider investing more or using another option to save and invest money.

Lower Your Expenses

It's easier to save money each month when your expenses are lower. There are many ways to lower your expenses, and here are some ideas:

  • Review your subscriptions and cancel those that you aren't using.
  • Work out at home instead of at the gym.
  • Negotiate your cable, internet, and phone bills.
  • Eat out one less time per week.
  • Seek less expensive auto insurance using The Zebra.
  • Downgrade your internet speed.

These are just a few ways of lowering your monthly expenses. Check out this article with over 40 ways to lower your expenses.

Additionally, you can use the app Trim to lower certain expenses. Trim will negotiate your cable, internet, and phone bills, as well as identify subscriptions to cancel and negotiate bank fees you've incurred. Trim takes a small portion of your savings as payment, so you only pay if they're successful. Here's our link to Trim.

Cut Back on Your Spending

Similar to lowering your expenses, cutting back on your spending will enable you to save more money. If you shop on popular online sites like Amazon, one method to curbing your spending is to erase your credit card information from each site. By erasing your credit card information, you're required to take additional steps each time you want to purchase something, giving you more time to stop yourself or change your mind.

Think of things that you spend too much money on. Video games? Beauty boxes? Alcohol? When you realize how much you're actually spending on these and similar things, you might find that cutting back could really save you a lot of money and that savings could be directed towards future financial goals.

Saving money leads to a more frugal lifestyle which has its benefits.

Create More Income

You can only save so much of your income, so when you're looking to save more money each month, your other option is to increase your income. There are many ways to do this. One way is to start a side hustle, such as doing freelance work on Fiverr or Upwork. You can offer services for just about anything online, such as:

  • Freelance writing
  • Graphic design
  • SEO consulting
  • Web development
  • Voice-over acting
  • Creating presentations

There are many more things you can offer on both Fiverr and Upwork. Simply search those sites to see the categories of services and find something you can do too.

There are some side hustles you can even do from bed.

Another way to create more income is to become more valuable at work by solving problems that no one else is. When you solve big problems at work, you'll have the leverage to ask for more money in the form of a raise or a promotion.

If getting a raise isn't possible, working overtime might be, or simply adding a second job temporarily. You can also invest whatever money you have to earn more money. Here's a guide to how to get started with just $100.

Important Things to Save For

Now that you have ideas for how to save more money each month and you're looking to maximize your savings rate, or at least attempt to reach 20%, here are some things that you might consider saving for.


An emergency is possibly one of the most important things to have money for. Emergencies come in the form of a trip to the ER, a broken-down car, a broken-down appliance, or when you lose your job and need money to tie you over until you find a new one.

Generally speaking, it's a good idea to have up to six months' worth of living expenses saved up in a safe place like an online savings account. However, if saving up six months' worth is currently a challenge, try starting with saving just $1,000 for your emergency fund.

The key benefit of saving money for an emergency is not going into credit card debt when something unexpected happens. By avoiding credit card debt, you keep your finances more secure.

Open up an online savings account with CIT Bank to start an emergency fund.


Saving for education can mean yourself going to college, your children's college fund, or you investing in continuing education and online courses. Education makes you more valuable, especially when the topic involves the type of work you do. For example, if you are a blogger, investing in a copywriting course will teach you to write better copy, leading you to write better articles and emails. Doing this increases your audience, your subscribers, and eventually your income.

Skillshare and Udemy are two websites where you can take online courses for affordable prices. Skillshare offers a subscription where you get access to thousands of courses and Udemy charges by the course.

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There are many great reasons to save money for family reasons. Some reasons you might want to save money for your family include:

  • Date nights with your spouse
  • Gifts for your children
  • Entertainment for the whole family
  • Family trips
  • Private school or college for your children
  • A new car for your family
  • A wedding or honeymoon

If you're the one in charge of the finances in your family, then knowing the value of saving money is key. Likewise, talking to your spouse about money without fighting is critical as well, as money conversations are essential to have in any marriage.

Vacations and Travel

Taking a vacation once in a while helps relieve stress and refresh us. Saving money for a nice trip to a favored or new location allows you to take longer trips with more entertainment or more luxurious accommodations.

Saving money on hotels or your trip, in general, enables you to spend money on other things while you're on vacation, such as theme park passes, fine dining, or other fun activities.

Your Dream Home

Whether you're currently renting or living in a home that you don't plan to keep forever, saving money for your dream home is a worthy goal. You'll likely need a hefty sum of money for your dream home to cover the down payment and closing costs. With that in mind, it pays to start saving early. 

For example, you might decide that you'll save $10,000 each year until you have enough to buy a house that's to your liking.

Specific Goals

You may have general financial goals that you're trying to reach in which saving money will lead you towards. For example, you might have a goal to obtain a net worth of $1 million in the next 30 years, and in order to do that, you decide to start investing a certain percentage of every paycheck. Another goal might be to purchase something fancy for yourself, like a sports car.

Goals can be short-term, medium-term, or long-term, and having goals helps you set direction in your financial life. By having direction and a clear plan, you can make your goals a reality. 

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Financial Freedom and Retirement

Often the ultimate financial goal for many people is financial independence so that they can comfortably retire. A key component to financial independence is maximizing your savings rate so that you can more quickly build up a nest egg in which to retire.

Some people report a savings rate of 50-80% of their income and retire in 10 years or less. Of course, this somewhat extreme way to retire early does come with sacrifice, such as forgoing many things now and working almost nonstop until the date in which the person has enough money to retire.

Wrapping It Up

The short answer for how much money you should save each month is that the more you save, the better. Saving 20% of your monthly income is a great start, and accomplishing this by paying yourself first is often one of the best ways to go. Then, once you've established a healthy savings rate, you can use that money to reach your financial goals.